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Sound Advice: May 19, 2021

Sell in May and Go Away? 

Thank our British cousins for the thought that it’s best to pull up one’s investment stakes in May and come back in the fall.  It harkens back to the custom of businesspeople leaving London and going off to the countryside during the warmer summer months.  Over extended periods of years, the data supports this idea, though the results, especially most recently, have been mixed.

To get a clearer view of how this works, I tallied the results of the Dow Jones Industrial Average from May 1st to October 31st and from November 1st to April 30th for every year from 1950 to 2020.  The numbers appear to be compelling.

During the May thru October span, on average, the gains averaged a paltry 0.3%.  But if you reinvested from November thru April, the typical advance was 7.3%.  No brainer, right?


It turns out that the results over the latest six years didn’t follow the pattern.  In 2016, 2018, and 2020, the market’s summer months were far stronger.

If we look at the long-term results by calendar quarter, there’s a similar pattern, with a slight difference.  Prior to 2020, the strongest quarters were October to December and January to March.  On average for the latest 55 years, the market rose by an average of 6.3% during that half of the year, compared with an increase of only 1.7% in the weaker quarters.

The slight difference is attributable to last year’s first-quarter plunge and the massive second-quarter rebound, which raised the long-term average for the latter period by 0.5%, placing it in line with the first calendar quarter.  That, however, was an aberration, not a shift in seasonal patterns. 

No matter how this is seen, it is clear that the market’s seasonal strength is skewed toward the colder months.  And its seasonal weakness tends to be most pronounced in late summer, early fall.

Given that observation, it’s interesting to see what happened after substantial downturns at that time of year.  Since 1965, there have been 15 third-quarter market drops of 5.0% or more.  Those pullbacks averaged 12.2%. 

Yet in the quarters directly following, 13 out of 15 showed sizable gains, averaging 7.5%, not enough to offset the prior loss, but enough to demonstrate that strength follows weakness.

Equally clear is the reality that, over time, the path of least resistance is higher.

N. Russell Wayne, CFP®

Sound Asset Management Inc.

Weston, CT  06883


Any questions? Please contact me at


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